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Oil prices have fallen a lot since last summer, and it's not just oil. Prices are down dramatically for all sorts of commodities, from metals like lead and copper to crops like corn and wheat. This week, NPR is taking a closer look at the impact of those plunging prices. To begin our coverage, Houston Public Media's Andrew Schneider reports on how his city's economy is changing in the wake of oil's dramatic drop.
ANDREW SCHNEIDER, BYLINE: The price of gasoline has ticked up in recent weeks as refineries do seasonal maintenance. But regular unleaded here still costs about a dollar less than it did a year ago. That's good for consumers, who have more money to spend. In Houston, though, the paychecks on which many of those consumers depend come one way or another from the oil business. The world's three biggest oilfield service firms, Schlumberger, Halliburton and Baker Hughes, have announced a combined 22,000 layoffs in recent months. Those job cuts are worldwide. But many are falling here, where all three have headquarters. Robert Harrold was recently let go by Halliburton's IT department.
ROBERT HARROLD: My manager's manager came by and told me I was needed in a meeting - and locked my computer up and went over next door to HR. And they said, you're being laid off - just like that.
SCHNEIDER: This was actually Harrold's second time being laid off by Halliburton in the past 10 years. He says he may turn to security consulting to pay the bills.
HARROLD: The oil services company layoffs don't just affect the folks working out in the oil fields.
SCHNEIDER: According to a model prepared by economists at the Federal Reserve Bank of Dallas, a drop of about 50 percent in oil prices is associated with a 1.2 percent drop in Texas employment. If the model proves correct, Texas stands to lose about 140,000 jobs. Jesse Thompson is a business economist at the Dallas Fed's Houston branch.
JESSE THOMPSON: So this would be mining jobs, finance, real estate, legal. This would encompass the entire spectrum of employment impact as a result of the price declines.
SCHNEIDER: Even with those layoffs, Thompson says Texas is still poised to eke out a modest gain in jobs this year. Houston will fare worse than the state on average, but it won't do as badly as areas closer to the actual drilling in South and West Texas.
THOMPSON: We have a lot of construction activity going on as a result of the shale gas production boom in the downstream side and the refining petrochemicals that are going to sort of buttress us against these declines in mining employment.
SCHNEIDER: Cheap oil is a boon to refineries. Petrochemical plants rely on natural gas - also cheap - to make their products. All that may be why workers at five nearby facilities were willing to strike and demonstrate downtown when negotiations for a new contract broke down. The strike is now in its fifth week.
(SOUNDBITE OF DEMONSTRATION)
UNIDENTIFIED PROTESTOR: What do we want?
UNIDENTIFIED PROTESTORS: Fair contract.
UNIDENTIFIED PROTESTOR: When do we want it?
UNIDENTIFIED PROTESTORS: Now.
SCHNEIDER: Still, the pain is already spreading across the region's economy. Office construction is on track to decline. Residential construction is expected to follow suit. At a recent meeting of the Houston Apartment Association, developers expressed fear that the region is already overbuilt. Kirk Tate is with Allied-Orion Group.
KIRK TATE: They're looking at the number of apartments that are under construction right now that are going to be delivered in the next 12 to 18 months. And they're looking at job growth being reduced 'cause the price of oil.
SCHNEIDER: Houston is no stranger to oil downturns. The price collapse of the 1980s scarred the local economy for years. The mantra throughout the latest boom is that the region has learned its lesson. It's diversified. It's better positioned to withstand another bust. That's about to be put to the test. For NPR News, I'm Andrew Schneider in Houston.
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